Farm bill remains challenge

Steering a tractor in a straight line across an open field takes a bit of learning. And so it seems with writing a new farm bill — given the extremes pulling to the right and left.

Fox News famously jumped in this summer with a television special featuring a California surfer deadbeat, grilling lobster bought with food stamps. Liberals cried foul but are pretty much doing the same now — caricaturing the wealthy getting farm subsidies even as nutrition programs face cuts.

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“Billionaires Received U.S. Farm Subsidies, Report Finds” read the Nov. 7 headline in the New York Times. And pulling the levers was the Environmental Working Group, which authored the report as part of its advocacy against the farm bill’s commodity and crop insurance titles.

EWG had matched the latest Forbes 400 list with its own farm database and found $11.3 million in payments from 1995 to 2012 went to 50 billionaires or farm businesses in which they had a financial interest. This plays well in the food stamp debate: “These billionaires aren’t worried where their next meal comes from!” sounded Rep. Rosa DeLauro (D-Conn.) Wednesday. But left out is any sense of proportion or the fact that most of the payments were before 2008, when Congress substantially changed the rules in the last farm bill.

Indeed, EWG confirmed to POLITICO that its billionaires list was culled from $200 billion in subsidies and disaster payments over 17 years — making the $11.3 million equal to less than one hundredth of 1 percent.

These next two weeks running up to Thanksgiving are pivotal if a farm bill is to be salvaged this year. And this pattern of distorted numbers not only sows confusion but can infect the negotiators themselves.

Consider the issue of target prices at the heart of a dispute over how to build a new safety net to replace the current system of direct cash payments to farmers — which has been the mainstay for the commodity title for almost two decades.

The Senate tends to build its system from revenue on down. The House from production costs up. But each is prone to short cuts that can become a distraction in themselves.

For example, the Senate bill proposes to set its targets by using a five-year rolling average of market prices multiplied by 55 percent. When pressed, the authors admit there is no magic to the 55 percent number. But as a practical matter, it makes the program worthless to many growers, especially wheat.

Calculations by POLITICO show that based on current market projections, wheat prices would have to drop 48 percent in 2014 before the Senate’s Adverse Market Payment plan would trigger. And the $3.66 per bushel reference price would still be 25 percent below a wheat farmer’s production costs — even after subtracting the value of his land and labor.

On the opposite side, the House faces criticism for being too quick to count even a farmer’s labor and land investments in calculating production costs. Part of this is regional and reflects the House’s greater sensitivity to the almost feudal land ownership structure in some of Southern agriculture. But the end result is it pushes the House’s target prices up higher than the Senate is willing to go.

In the case of barley, Minnesota Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee, makes no secret of the fact that he hopes the higher target price will drive up U.S. production — and avoid a repeat of what he witnessed in oats, where so much production moved into Canada. But other crops, like soybeans, with large export markets of their own, worry more about target prices inviting sanctions by the World Trade Organization.

The House has begun to scale back its target prices in the talks now. And those backing the Senate approach say that they will quickly move the 55 percent multiplier higher — if they can keep the concept of using a rolling five-year market average.

“Are we steadfast on 55 percent? I don’t think so,” said Sam Willet, a senior director of public policy at the National Corn Growers Association told POLITICO.

But the philosophical differences are real. The Senate focuses first on farm revenues — not costs. It concedes that the recent run of high commodity prices will end sometime, but the economic argument is that production costs — such as land and fertilizer — will also fall with time.

The House would argue that it is better to err on the side of the farmer’s survival. And it is aggravated by the fact that the Senate invests so much in a “shallow loss” program even as it is tamping down on target prices intended to build a floor against a real market collapse.

This so-called Agricultural Risk Coverage program will trigger if prices drop 12 percent before what is again a five-year Olympic rolling average. The idea is to build in some cushion if markets slide in the future and the income protection offered by crop insurance deteriorates.

In this context, Willet argues that the “shallow loss” label is a bit of a misnomer. But having heavily promoted this strategy, the Corn Growers are now in the somewhat embarrassing situation where they appear to be the first at the table to claim federal payments next year.

The five year average for corn is expected to be $5.30 per bushel in 2014, so if prices fall below 88 percent or $4.66 per bushel, ARC would be triggered. This is a hard pill for the House to swallow since the per acre production costs for corn — subtracting out fixed costs of land and labor — are close to $4 according to Agriculture Department statistics.

Caught most in the middle is wheat. This is a crop important to House Agriculture Committee Chairman Frank Lucas’s (R) home state of Oklahoma. But given the six major classes of wheat grown in the U.S., it’s a crop with more diverse opinions than monoliths like corn and soybeans, which have elbowed wheat out of the way given the focus on ethanol and biodiesel production.

“What the wheat growers want is a farm bill,” Brett Blankenship, a farmer in Washington state and second vice president of the National Association of Wheat Growers, told POLITICO. “And we expect our policymakers to come together. We can see room for a compromise that doesn’t have an adverse impact on trade and plantings.”